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Passive Industry Analyst Dennis Zogbi - 1/05/09

MarketEye: Twelve Ways to Cut Costs in 2009

Contributor:
Dennis Zogbi

Dennis Zogbi Dennis M. Zogbi is president and owner of the Paumanok Group, which includes Paumanok Publications, Inc., Industrial Market Research Division, and Passive Component Industry magazine. ( More... )

01.05.2009 // Posted by: Dennis Zogbi // Posted in: Articles, Passives

Statements of fact and or opinions expressed in MarketEye by its contributors are the responsibility of the authors alone and do not imply an opinion of the officers or the representatives of TTI, Inc.

Dennis Zogbi	Jan. 5, 2005






Not everyone hits all of the cylinders all of the time. Certainly over the boom times of the past two years, the mantra was to get parts out the door just in time to meet customer demand. Now, instead of chasing your own tail, the time is right to organize; review all paperwork, file it, and streamline the process. This is one of the hidden crutches of any company and results in lost time looking for key bits of paper and pieces of information. It is absolutely the right time to organize everything including basic items such as sales, taxes, regulatory data, vendor data and research documents to name a few. Here are some proven methods for saving money in 2009. 1. Use Interns More Aggressively Interns are a good choice for cutting costs in a down economy and the relationship is mutually beneficial. Manufacturers realize real cost savings and the interns gain valuable experience and a foothold in the economy. Manufacturers should take every advantage of any warm bodies local universities want to send in. The timing is right because much of what needs to be done in a down economy is administrative and only slightly academic. Handling administrative tasks leads to better efficiency and cost savings during the upturn. However, the tasks may be tedious and time consuming. This is the perfect type of job for an intern. 2. Develop Templates Research has shown that the standard office (as few as 20 people) can have paperwork requiring up to 50 templates and sub-templates in the pursuit of efficiency. The critical aspect to understand is that each office is different and the method by which to apply templates is through repetitive tasks. The obvious ones are for billing and receiving; fax transmission cover sheets; company letterhead and business cards. This concept is usually further applied to envelopes that are preprinted for repeat vendor payments or automated email replies for every foreseeable office absence. The more advanced office may develop spreadsheet templates requiring daily maintenance. Those are typically applied to stocks, pricing, demand and inventory. Templates can also be applied to company presentations and news releases. 3. Secure Free Content Industry trade magazines, websites and blog pages within the supply chain look for content from qualified marketing, technical and senior staff of component manufacturers. This is a quick way to obtain high level market exposure and to fringe market segments with no costs other than the time it takes to write an article and offer it to the media. 4. Shift Marketing and Advertising Dollars Online Printing and freight charges seem immune to cost reduction, therefore the ad budget may be extended by moving programs online. This is a step back from sending out catalogs, mailing pieces and brochures via the USPS. A greater emphasis is now placed on channeling customers to the website, where a greater wealth of information and content drives volumes and sales. The online community of component vendors is a logical and symbiotic segment. Its growth is ultimately beneficial to future sales of components. Obviously, the move is also a green one in the eyes of the world. 5. Target Your Marketing Like a Rifle Shot As component vendors, the markets that affect us are diverse. Growth opportunities in 2009 will be limited but obvious. Infrastructure spending in the United States, China and Germany will drive demand for specialty electronics in power transmission and distribution, renewable energy, railroad electronics and airport lighting. It would be extremely cost effective for component manufacturers to offer free content to magazines, websites, and blogs that tap into these specific industries in the key countries mentioned. 6. Learn More About Your Market Spend some time and study the markets and the technologies of your industry and determine where the customer will be in six months from now, a year from now and five years from now. Meet at least a portion of their needs specifically when they need them. Overall in discrete components the obvious answer is more volume. For specialty markets this will be better form factor, higher voltage, higher frequency and better technical performance. Also, reading market research about your own industry can prompt new ideas and innovation at many levels. Anyone can have a good idea, but it’s the one who supports his idea with good data that gets funded. 7. Rethink the Value of Your Own Supply Chain All of your contacts and networks are of interest to someone else because of the nature of the product and service you provide. Some companies will pay for that access because the success rates are much higher than paying for a full page ad or a full mail campaign. Private label agreements for access to brand and distribution channels are a low cost way to handle more parts through an existing system. 8. Strategize with Your Vendor Understanding the cost structure, to the most detailed level, of your own raw material supplier helps to understand the threshold of convenience he can go before he must expect a different level of comfort and existence. Work together to get through the current crisis. It is in the greater interest of industry survival not to do otherwise. This thinking results in how each in the supply chain can remain relevant by saving his partner time in some way. 9. Allow for Director Component Sales Online The costs associated with increasingly more complex sales sites online have come down significantly. Those that guarantee credit card information online and generate increasingly larger volumes of global revenue for local suppliers of parts have increased their ability to sell 24/7. Costs associated with site development are minimal and the results are perpetual. At the least, become easy to buy from online. 10. Encourage Telecommuting and Use Video to Communicate Instead of travel, invest in and embrace video conferencing. Costs are way down and quality is good. Allow people on the web to work with you from their own home where productivity levels tend to be high and quality also tends to be good. Encourage some people to become their own businesses. 11. Think Opposite: It May be Time to Expand Once you are organized, and have remapped the organization, it may be time to consider expanding operations. Obviously, this is not for everyone and is a difficult concept to understand. One thing is certain, based upon 20 years of solid research; companies will still need passive components over the next 20 years to meet the production schedules for electronic goods. Therefore now is the time to spend (someone else’s) money on capacity expansion at cut-rate prices so that when the market rebounds you can crush the competition. This is obviously a solution for mass produced product lines such as MLCC and Chip resistors. This is one that is certainly more directed toward the fierce competition playing out in China, Korea and Japan. Expansion is a vote of confidence in your brand, your product, your workforce and your future. It generates positive energy in negative times. 12. Invest in Research and Development Research and development leads to innovation and that is the cornerstone of sales in a down economy. Instead of investing in marketable securities, invest in research and development because the return will certainly be more predictable then what will happen in the financial markets over the next two years.